Commercial equity line of credit to finance first Airbnb?

[Nickie Moreno]

I am the owner of a seasonal ice cram store. My Business, lot and building have now been paid off for a year(bought on 10 year land contract). I am also a real estate agent. I have long had a dream/plan of buying a few Airbnb in locations that I want to be a "snowbird" in.  My plan has always been to start in  the Savannah, Georgia area. I have an appointment to speak with a lender about doing an equity line of credit against my ice cream store to finance the down payment of my first Airbnb as I don't want to tap into savings. Is this a smart move? Want advice can you all offer?

[Dylan H.]

Hey @Nickie Moreno, awesome that you have this great tool of a line of credit from your business. I would personally not recommend the LOC as a down payment on a property, even as a young, aggressive investor. If you did, you would have this large interest-only balance looming over you with little motivation to pay down quickly.

If you haven't, would also recommend reaching out to some rockstar realtors in Savannah to get a good idea of the super competitive Airbnb market if you don't already have an idea of how it works. The airbnb market in Savannah is pretty restrictive downtown, and our beach town of Tybee just implemented a moratorium on issuing new certificates. I would reach out to Chelsea Phillips or @Pat Wilver who are investors and active realtors very plugged into the Savannah market.

Back to the LOC, I would only use it as a tool to make cash offers on discounted properties, where you could refi out that money. Use the savings as a down payment if you're going conventional, but it's just an opinion. The cash as a down payment is a position of strength, vice the LOC which is the opposite.